Panel on Housing ( Minutes ) 7 Sept 1998

LC Paper No. CB(1) 265/98-99
(These minutes have been seen
by the Administration)

Ref: CB1/PL/HG/1

Revised

Legislative Council

Panel on Housing

Minutes of meeting
held on Monday, 7 September 1998, at 4:30 pm
in the Chamber of the Legislative Council Building

Members present :

Hon LEE Wing-tat (Chairman)
Hon Gary CHENG Kai-nam (Deputy Chairman)
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon Edward HO Sing-tin, JP
Hon LEE Cheuk-yan
Hon Fred LI Wah-ming
Hon NG Leung-sing
Hon Ronald ARCULLI, JP
Hon James TO Kun-sun
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon LEUNG Yiu-chung
Hon Andrew WONG Wang-fat, JP
Hon LAU Kong-wah
Hon Andrew CHENG Kar-foo
Hon SZETO Wah
Hon TAM Yiu-chung, JP

Members absent :

Hon Albert HO Chun-yan
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon Christine LOH
Dr Hon YEUNG Sum
Hon Timothy FOK Tsun-ting, JP

Public officers attending :

For item IV
Housing Bureau
Miss Sandy CHAN,: Principal Assistant Secretary (2)
Housing Department
Mr Raymond Bates,: Deputy Director/Management (Acting)
Mr YIM Ka-yan,: Chief Estates Surveyor/Commercial Properties
For item V
Housing Bureau
Ms Eva TO,: Principal Assistant Secretary (1)
For item VI
Housing Bureau
Ms Eva TO,: Principal Assistant Secretary (1)
Miss Sandy CHAN,: Principal Assistant Secretary (2)
Housing Department
Mr K H LAU,: Business Director/Allocation and Marketing
For item VII
Ms Eva TO,: Principal Assistant Secretary (1), Housing Bureau

By invitation :

For item V
Concern Group on the Rights of Owners of Park Belvedere: Mr FONG Chi-cheong; Miss TUNG Po-yee, Rebecca; Mr WONG Koon-man; Miss LEUNG Siu-chun, Sanna; Mr TONG Po-chi
Hong Kong Housing Society
Mr Victor SO,: Executive Director
Mr Francis LAW,: Director (Planning & Development)
For item VI
Hong Kong Housing Society
Mr Victor SO,: Executive Director
Miss L C WONG,: Director (Estate Management)
For item VII
Estate Agents Authority
Mrs Grace CHOW,: Chief Executive Officer

Clerk in attendance :

Ms LEUNG Siu-kum,: Chief Assistant Secretary (1)2

Staff in attendance :

Miss Becky YU,: Senior Assistant Secretary (1)3

I Confirmation of minutes of previous meeting
(LC Paper No. CB(1) 150/98-99)

The minutes of the meeting held on 23 July 1998 were confirmed.

II Information paper issued since last meeting

2. Members took note of the submission from the Concern Group for Redevelopment of Block 20 of Tai Wo Hau Estate circulated vide LC Paper No. CB(1) 103/98-99.

III Date of next meeting and items for discussion

3. The next meeting would be held on Monday, 5 October 1998, at 4:30 pm to discuss the following:

- Rehousing for bedspace apartment dwellers.

IV Rent reduction for commercial premises in public housing estates and factory buildings
(LC Paper Nos. CB(1) 102/98-99, 104/98-99, 148/98-99(01) and 170/98-99)

4. On the relief measure of freezing of rents for a period of one year, a member questioned if the rent had been frozen at a reasonable level taking into consideration that the residential market had already dropped to the 1993 level. CES/CP responded that the previous rent of those tenancies eligible for freezing of rent was set in 1995 during which the general property price was at a relatively low level. Therefore, freezing the rents at 1995 level for one year was an effective measure to help relieve the immediate hardship of tenants. He explained that a direct comparison between residential and commercial properties was inappropriate since a drop in the rental or sale value of the former might not necessarily affect the latter. Nevertheless, he said that HA would consider later this month the rental arrangements after the expiry of the one-year period.

5. Members requested that tenancies commenced or renewed between 1 February and 31 December 1998 be also eligible for rent reassessment since the rents were determined a few months prior to the commencement of the new tenancies and the rent level at that time was still very high. CES/CP undertook to relay members' concern to HA for consideration.	Admin

6. On rent reassessment scheme, members were dissatisfied that HA rejected to employ an independent body to conduct rental reassessments or to establish an appeal mechanism similar to the Lands Tribunal to deal with disagreements over the reassessments. The Deputy Director/Management (DD/M) reiterated that as rents were fixed with the mutual consent of HA and the commercial tenants at the time of reaching tenancy agreement and formed part of binding contracts between both parties, it would be inappropriate for an outside party to conduct rental reassessments. He assured members that rental reassessments for commercial premises of HA were conducted with great care by professional estate surveyors of the Housing Department (HD) who were familiar with the special characteristics of the commercial premises in public housing estates. CES/CP added that it was the intention of HA to reach agreements with all prospective commercial tenants. Tenants dissatisfied with the results of rent assessments could request for a review with the provision of rental evidence or supplementary information, including turnover of business and assessments conducted by surveyors in the private sector. This was a system similar to that of an appeal channel through which tenants could exchange views with HD with a view to reaching a consensus on rents. No application forms nor application fees were required for review. HD would give replies to applicants in four weeks' time and all reviews would be completed by October this year.

7. Despite the Administration's explanation, members insisted on the need to establish an appeal mechanism. A member pointed out that in some cases, the rents of commercial premises of HA were still higher than that in the private sector even after the rent reassessment. Moreover, the assessment results between HD and the private surveyors could be very different. The case of the market in Yiu Tung Estate and the nearby private market was a good illustration. To facilitate a better understanding, the member urged HD to disclose the weighting of individual factors in assessing the amount of rent reduction. CES/CP explained that under the current arrangements, rents were re-assessed taking into account factors such as the nature of business, the location and the physical characteristics of the premises, the size of the catchment areas, the date of contract signed and the level of the existing rent etc. As regards the case of Yiu Tung Estate, CES/CP advised that the commercial premises were formerly run by a single operator who quitted in April 1998. Since then, HA took over the management of the premises and had been re-entering into agreement with the tenants concerned. Temporary licences were issued to these tenants during the transitional period. CES/CP stressed that the rent of the private market nearby was only one of the factors to be considered by HD in determining the rents for the shops and market stalls in Yiu Tung Estate.

8. On vacancy rate of HA commercial premises, some members were of the view that the unwillingness of HA to lower the rents of its commercial premises upon re-letting had attributed to the vacancy situation. CES/CP did not agree with members' observation having regard to the low vacancy rate of 4.5% for HA commercial premises. Nevertheless, HA was committed to reducing the vacancy rate and had introduced a first-come-first-served system on trial basis for leasing 152 vacant premises. So far, 82 premises had attracted applications with 35 premises already let.

9. As to why the Administration was not able to provide the information on vacancy positions of shops or market stalls of different trades in all estates for the five years as requested at the last meeting on 23 July 1998, CES/CP explained that this was due to the large portfolio and complexity in the types of commercial premises managed by HA and the often changing designated trades for individual premises. HD would however endeavour to provide the relevant information on the vacancy position at a specified period as far as practicable. At members' request, the Administration undertook to provide information on the vacancy rate of individual shopping centres and markets in the second quarter of 1998, in particular on the vacancy period before a shop/stall was re-let to a new tenant under the new first-come-first-served system and the difference between the rent of the new tenancy and the rent offered by HD to the previous tenants upon expiry of the tenancies.

Admin

10. On commercial premises with mezzanine floor units, CES/CP undertook to provide a written reply to Hon CHAN Kam-lam's questions raised two days before the meeting. As regards rent for car parks, DD/M undertook to provide further information to members once the annual review was completed at the end of this month.

Admin

V Sandwich Class Housing Scheme

Meeting with the Concern Group on the Rights of Owners of Park Belvedere
(LC Paper No. CB(1) 148/98-99(02))

11. At the invitation of the Chairman, representatives from the Concern Group on the Rights of Owners of Park Belvedere highlighted the salient points in the submission. They considered that the decision of the Housing Society (HS) to exclude buyers of Park Belvedere from the Second Mortgage Loan Scheme (SMLS) on the ground that buyers concerned had completed their purchases before the Scheme was announced on 7 August 1998 was unfair. Amidst the economic downturn, they urged HS to re-consider their request for inclusion under the Scheme so as to alleviate their financial hardship.

Meeting with the Administration
(LC Paper No. CB(1) 148/98-99(03))

12. In response to the Chairman, the Executive Director/HS (ED/HS) explained that SMLS was a financial arrangement to assist Sandwich Class Housing Scheme (SCHS) buyers who encountered difficulties in completing their purchases. He emphasized that this was an alternative payment option, under which a second charge loan of not more than 20% of the original purchase price with a five year interest free repayment holiday would be offered. In the case of Park Belvedere, as most of the purchasers had completed the sale and purchase transactions before the announcement of SMLS on 7 August 1998, HS concluded that they were not eligible for the Scheme.

13. Members considered that HS should adopt a more flexible approach in dealing with the request from purchasers of Park Belvedere in view of the short time lag between the issue of Completion Notices to buyers concerned on 29 June 1998 and the announcement of SMLS on 7 August 1998. Besides, the date upon which SMLS should take effect was an only administrative decision. In reply, ED/HS emphasized that the timing at which SMLS was announced was not manipulated to exclude buyers of Park Belvedere but on account of the need to consult relevant parties, including the Government. As these buyers had already been assisted by the maximum 80% loan guarantee and the mortgage interest subsidy for the first three years and could successfully complete the purchase, it would be inappropriate to apply SMLS retrospectively on them. Previous purchasers backtracking the timing in claims would set a very undesirable precedent for all HS' buyers in the past. Furthermore, ED/HS agreed with a member's observation that it would be technically difficult to arrange for a second charge loan after the completion of transaction. Members however expressed doubt on the possibility of backtracking from previous purchasers as the last SCHS project was completed two years ago.

14. A member was of the view that it would be unfair for HS to single out purchasers of Park Belvedere from SMLS since they were facing the same financial hardship as their counterparts in the seven eligible pre-sold SCHS projects. Moreover, the former had joined the latter in requesting for additional assistance from HS at the outset of the economic slump. The Director (Planning & Development)/HS responded that HS had checked the financial arrangement of purchasers of Park Belvedere. It was revealed that except for the 20 default cases on personal reasons, all 862 owners had completed their assignments. Of these, 25% had borrowed mortgage loan amount less than 70% of the selling prices, 33% had adopted mortgage loan tenure of less than 15 years, of which 10% were less than 10 years. The statistics clearly indicated that these buyers did not encounter acute financial difficulties in completing their purchases.

15. Given the fact that the provision of SMLS to buyers of Park Belvedere would not create additional financial burden on the part of HS, members were not convinced that HS should refuse the request of purchasers concerned. The Principal Assistant Secretary for Housing (1) (PAS for H (1)) reiterated that it was a matter of principle not to apply a new policy retrospectively. As SMLS was an alternative payment arrangement, this was not applicable to those buyers who had already completed their assignments. Besides, the average selling price of Park Belvedere was $2,348 per square foot. There was still about a 30% discount to the current market price and the average monthly instalment of $13,000 should be within the affordability of the purchasers concerned. ED/HS added that since HS was a self-financing organization, it had to strike a good balance between prudence in the management of its finance and providing flexible payment methods for purchasers.

16. Members remained unconvinced of both the Administration's and HS' response. Mr LAU Kwong-wah proposed and Ms CHAN Yuen-han seconded the following motion:

"That this Panel urges the Hong Kong Housing Society and the Housing Bureau to accept the request of owners of Park Belvedere by providing purchasers of Park Belvedere with the option of the Second Mortgage Loan Scheme with a five year interest free repayment holiday."

The motion was voted on and endorsed. The Chairman instructed that the motion be conveyed to HS so that it could re-consider the request of buyers of Park Belvedere before the expiry of the deadline for acceptance of the mortgage interest subsidy for some purchasers on 23 September 1998.

(Post-meeting note: A letter to the Hong Kong Housing Society on the motion was issued on 9 September 1998.)

VI Abuse of Home Starter Loan Scheme and Home Purchase Loan Scheme
(LC Paper Nos. CB(1) 148/98-99 (04) and (05)

17. Some members opined that the recent incident where a Home Starter Loan Scheme (HSLS) beneficiary used his loan to purchase a "luxury" flat had aroused public concern over the proper use of public money. PAS for H (2) responded that the Administration was also very concerned about the case and was considering means to prevent similar recurrence. She however emphasized the need to strike a balance between the proper use of public money and providing adequate flexibility for HSLS applicants to select their own flats. As to why the Administration did not put a cap on the price of properties to be purchased under HSLS as was the case with other subsidized home ownership schemes, PAS for H (2) considered it not necessarily the best solution as the prescribed income and assets limits had already confined the Scheme to low and middle income families. She emphasized that the case referred to was very unusual as most of the flats purchased by HSLS beneficiaries were at prices below $2.5 million.

18. On the no-property rule, a member asked if a person who had rescinded purchase and hence had never owned any property within the specified period of ten years was eligible for HSLS. PAS for H (2) responded that after seeking legal advice, it was concluded that as the intention of HSLS was to offer low interest loans to eligible first time home buyers in the low and middle income groups who were unable to purchase their own homes owing to the requirement for substantial downpayment, it might not be appropriate to use HSLS to subsidize persons who could afford to pay the downpayment, despite whether the transactions had eventually been completed or not. In reply to a related question, the Director (Estate Management) of HS (D(EM)/HS) confirmed that a person who was a silent partner owning 1% share of a property holding company or inherited an allotment of a property having an insignificant monetary value, would still be eligible for HSLS after he resigned from the company or took legal procedures to give up the inheritance. In the above special circumstances, no-property rule will not apply in respect of the property concerned.

19. Some members considered it a policy change if family members of the principal tenant of public rental housing (PRH) flats were allowed to apply for HSLS while retaining their names in the public housing tenancies. In response, PAS for H (2) explained that under the existing policy, occupants of PRH units could also apply for the Home Ownership Scheme (HOS) and Home Purchase Loan Scheme (HPLS) before they had deleted their names from the tenancies. The present extension of this policy to HSLS therefore was only an adjustment and not a policy change. Family members concerned were also required to delete their names from the tenancies upon obtaining a loan under HSLS. She added that such an adjustment would help alleviate the pressure on demand for larger or additional PRH flats for relief of overcrowded conditions. Besides, tenants concerned would also be required to move to a smaller unit in accordance to the space allocation standards in the event of deletion of family members. The flats released as a result could be re-allocated to other needy families. Members remained unconvinced as HSLS was not exclusive for overcrowded families in PRH. Furthermore, it would be unfair to ordinary applicants since their chances for successful application would be reduced. D(EM)/HS clarified that the quota allocation for non-nuclear beneficiaries under HSLS was set at 20% and this had been under-utilized since the introduction of the Scheme.

20. The Chairman disagreed with PAS for H (2)'s explanation. He supplemented that successful application for HOS and HPLS from non-nuclear PRH tenants had been very few. The fact that these tenants were allowed to apply for HSLS had implied a substantial policy change. He also considered the existing housing loan schemes viz. the Sandwich Class Housing Loan Scheme (SCHLS), HPLS and HSLS confusing. He urged the Administration to review the current operation of these schemes to ensure effective use of public money. While understanding the Chairman's concern, PAS for H (2) emphasized that different schemes had their different objectives and targets. By way of illustration, SCHLS was targeted at middle income families, HPLS at low income households and HSLS at first time home buyers. Nevertheless, the Administration was undertaking a comprehensive review on the operation of these schemes. It was hoped that the review could be completed in end 1998.

VII Any other business

Clearance of squatters and temporary housing areas

21. The Chairman drew members' attention to a submission from the Association for the Rights on Squatter Clearance in Diamond Hill Area tabled at the meeting. Members noted the Association's concerns and considered it a policy change if residents in squatters and temporary housing areas were required to undergo a comprehensive means test, covering both income and net assets, before admission to PRH. Mr Fred LI proposed and Mr SZETO Wah seconded the following motion:

"That this Panel urges the Administration to:

withdraw the proposed measure of conducting income and assets tests on residents of squatters and temporary housing areas;
implement the arrangement for re-housing residents of squatters and temporary housing areas affected by clearances within the same district; and
build more public rental housing flats for re-housing all residents of squatter areas and temporary housing areas affected by clearances as well as Waiting List applicants."

The motion was voted on and endorsed. The Chairman instructed that the motion be conveyed to HA for consideration before its meeting on 10 September 1998.

(Post-meeting note: A letter to the Administration on the motion was issued on 8 September 1998.)

Estate Agents (Registration and Licensing) Regulations
(LC Paper No. CB(1) 148/98-99(06))

22. At the invitation of the Chairman, PAS for H (1) highlighted the salient points in the information paper. Members then proceeded to discuss the various aspects of the Regulations.

23. On general licensing requirements, a member remarked that the condition for no criminal record in the grant of licences would deprive the opportunity of ex-offenders for rehabilitation. While acknowledging the member's concern, PAS for H (1) emphasized the need to ensure professional integrity among estate agents and the need for EAA to have power to consider past criminal records in granting licences. The criteria was also commonly adopted in other licensing systems. As such, the grant of licences to persons who had been convicted of fraud and corruption should be restricted.

24. On educational qualifications, a member questioned the rationale for setting the threshold at Form five for new entrants to the trade. PAS for H (1) explained that as estate agents played an important role in the property transaction process, it was necessary that they possessed some fundamental educational qualifications in order to cope with the rapid changes in the operating environment of the real estate market, rising expectations of consumers and increased complexity of the property transaction. This was also in line with the objective to recruit and attract better qualified persons into the trade so as to raise the standard of service in the long term. Besides, the qualification of Form five was a common pre-requisite for general clerical posts. PAS for H (1) added that applicants were only required to have completed Form five level without any reference to the academic achievements in Hong Kong Certificate of Education Examination. The member remained unconvinced of the Administration's response and remarked that consideration should be given to include those who had attained Form three level and completed vocational training to optimize the use of manpower resources.

25. On arrangement for existing practitioners, some members asked if the Administration had consulted the trade on the qualifying examination. PAS for H (1) confirmed that EAA had issued a consultative paper in May 1998 to gauge the opinion of the trade on the proposed licensing requirements and practising regulations for the estate agency trade. A number of seminars had been arranged to exchange views with the trade, in particular those in the New Territories who had had strong views on the examination. EAA had subsequently revised its proposals taking into account views received during the consultation exercise. These included the extension of the period from two to three years for practising agents to pass the examination. Moreover, there was no restriction on the number of qualifying examination to be taken by practitioners. PAS for H (1) added that the focus of the examination was on practical knowledge and this would be in the form of short questions and multiple choices for estate agents and multiple choices for salespersons.

26. In view of time constraints, the Chairman advised that members could form a Subcommittee to examine the Regulations in greater details after these were introduced to the Legislative Council.

27. There being no other business, the meeting ended at 7:15 pm.

Legislative Council Secretariat
7 October 1998